Good day, ladies and gentlemen, and welcome to the WisdomTree Second Quarter Earnings Call. [Operator Instructions] As a reminder, this conference call may be recorded. I would now like to turn the conference over to Jason Weyeneth, Director of Investor Relations, you may begin.

Good morning. Before we begin, I'd like to reference our legal disclaimer available on today's presentation. This presentation may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. A number of factors could cause actual results to differ materially from the results discussed in forward-looking statements, including, but not limited to, the risks set forth in this presentation and in the Risk Factors section of WisdomTree's annual report on Form 10-K for the year ended December 31, 2017 and quarterly report on Form 10-Q for the quarter ended March 31, 2018. WisdomTree assumes no duty and does not undertake to update any forward-looking statements. Now it's my pleasure to turn the call over to WisdomTree's CFO, Amit Muni.

Thank you, Jason, and good morning, everyone. Since our operating data is already known, I'll quickly go through the important items for the quarter and discuss some updated guidance around expenses. I'll then turn the call over to Kurt MacAlpine for some comments on our recent partnership announcements and then Jono for some closing comments, before opening it up for Q&A. Beginning on Slide 3. Our global AUM was $60 billion at the end of the second quarter, reflecting the April close of our acquisition of ETF Securities, partly offset by outflows and market depreciation. Despite the strengthening of the U.S. dollar, increased political and economic uncertainty in Europe and growth concerns in Japan still continue to outflow from HEDJ and DXJ. As the chart in the middle shows, momentum continue to build around our fixed income strategies, which posted higher inflows for the fifth straight quarter. The chart on the right breaks down our flows by listing region, with Canada continuing to show strong organic growth. Turning to the U.S. segment flow highlights on Slide 4. While the overall U.S. segment endured outflows from HEDJ and DXJ, we continued to see benefits flow breadth and depth from our strategic initiatives around Advisor Solutions, investments in technology and new distribution channels and partnerships. A number of funds with creations on a daily basis remains above historical levels and the percentage of our assets in core funds continue to grow, generating inflows for the 10th straight quarter, despite the fact that the second quarter flows for the industry were down 11% from the first quarter. At the fund level, we saw strong demand for our short duration fixed income strategies, including our 0 duration high-yield strategy, HYZD and our floating rate treasury strategy, USFR. USFR generated a $167 million of inflows…

Thank you, Amit. Good morning, everyone. Over the past 12 to 18 months, we spent a lot of time discussing the investments that we've made in technology and distribution and the expected impact it would have on our relationships with our clients and prospects. We've made these investments with 2 primary objectives in mind. To be the preferred business partner and the primary product provider for intermediary platforms and advisors. The combination of our technology-driven Asset Allocation tools, which includes our Digital Portfolio Developer tool, our open architecture model portfolios, our award-winning Advisor Solutions program, the investment in AdvisorEngine and our data intelligence capabilities have positioned us well to achieve these objectives. The capabilities that we bring to the table today and the resulting conversation we're having with platforms and advisors has transformed how we go to market. While it takes time to build better advisory relationships and negotiate platform opportunities, we've already announced significant wins globally, such as our relationship with TD Ameritrade, that have already meaningfully impacted the breadth and depth of our flows. In the second quarter alone, we've entered into 4 types of new strategic relationships that we're excited to share with you today. First, we entered into a strategic agreement with Cetera Financial Group, which is the second largest independent financial advisor network in the nation, with 7,900 advisors managing $240 billion in client assets. As part of this agreement, WisdomTree ETFs will be the first, and currently only, ETFs available as part of Cetera's no-transaction fee platform, and we'll be delivering our Advisor Solutions program to their platform and financial advisors. We believe this is a groundbreaking relationship in our industry as it is the first time that an ETF sponsor has partnered directly with an independent broker-dealer in this capacity. We believe strategic…

Thank you, Kurt, and good morning, everyone. As the chart on Slide 11 shows, DXJ and HEDJ remain a frustrating headwind, but it is important not to lose sight of the underlying growth our platform has exhibited over time. Over the past 12 years, our global positioning industry has never been stronger than it is today. The enhancements and investments we've made in our distribution strategy are now translating into formalized strategic relationships and that is the underpinnings for exciting future growth, both in the U.S. and abroad. In Europe, the integration of ETFS is well underway. Our European operations are now profitable. And we are fully equipped now to drive growth in the region. In Canada, we are generating excellent organic growth and establishing ourselves in a market, we believe, is poised for continued growth. As Amit highlighted, technology and data investments made over the past few years are driving cost efficiencies across our platform, and we expect to drive more cost efficiencies over time. These technology investments and our Advisor Solutions program is allowing us to connect with clients and prospects in a way that wasn't possible a few years ago. The conversations we're having today are unlike any we've had before. In addition to the relationship we just announced with Cetera, a clear example of this is the temporarily, undisclosed independent broker-dealer Kurt just highlighted, that will be adopting AdvisorEngine's platform and making WisdomTree models available to their nearly 3,000 advisors. This is an important win that provides a cornerstone client for AdvisorEngine, while also showing the strategic value of our investment in the firm. The ability to have holistic discussions at the executive level around technology, to more efficiently run their business, Asset Allocation products to drive better outcomes for their clients and Advisor Solutions to…

[Operator Instructions] Our first question comes from the line of Craig Siegenthaler of Crédit Suisse.

This is more of an industry-specific question than really kind of WisdomTree, but we have watched institutional investors, tactical investor and also the smart beta segment really take a pause in 2018. We saw with Invesco, we saw with BlackRock in the result this quarter too. I'm just wondering, what is your perspective on this trend? And could we see a rebound in the second half?

So yes, industry slows -- the industry saw a slowdown in flows and it's global. I mean, Europe has been particularly pronounced this quarter. Prior quarters were running something like $20 billion to $25 billion of flow and in this quarter came in at $3 billion. So I think the markets have been volatile, higher interest rates and sort of trade war concerns have unsettled the investors and investors express their confidence or lack of confidence through ETFs more quickly than they do through other structures. But I really don't think anything is going to derail the growth of ETFs longer term. I think this is just market sentiment-related. With respect to sort of smart beta and those types of strategies, this is really been a momentum market since 2009, and you're seeing that momentum has been very hard to beat. I think if there is a correction, you'll see alternative ratings, smart beta, modern alpha, liquid alts, things that minimize volatility, really picking up steam to the advantage of WisdomTree and some other players.

Great. And then just as my follow-up. On the Robo-advisers and other tools offered by AdvisorEngine, can you update us on, if there is any additional advisory firms that have signed up recently to use these tools? And also, how should we think about AdvisorEngine and then the model portfolios contributing to flows over the next 12 months?

Sure, Craig, it's Kurt MacAlpine here. So on your first question, so AdvisorEngine, as you know acquired the Junxure platform, which is one of the leading CRMs for wealth managers in the industry, which has over 1,500 firms managing over $600 billion of assets earlier this year. Since that acquisition, from a reporting standpoint, they report the assets and then the relationships in aggregate. What I can let you know is that the platform itself continues to realize strong growth onboarding a number of clients over the past few months, including a large client that we're looking forward to disclosing in the coming weeks to all of you as well. If you think about the model portfolios, was your question more about model portfolios on AdvisorEngine or just the model portfolio initiative in general?

It was actually both efforts, which are like separate from kind of what was in Tree's legacy core business and how will it contribute to flows to the cross sell over the next 12 months?

Great. So if you think about our model portfolio initiative more broadly, we're still in the very early stages of beginning to monetize this investment, kind of officially commercializing the portfolios late last year. Since then, we've already experienced very strong growth in our assets, tracking our models and over time, we expect that this Model Portfolio initiative will be a significant contributor to both the consistency of our flows, but also the diversification of our flows going forward. I mean, despite only launching this last year, we already have the models available for execution today on TD Ameritrade, Envestnet, Oranj, Interactive Brokers and then, obviously, through AdvisorEngine is well. So I think the strong start that we'd experience and the strong adoption on platforms is really a testament to how we construct these portfolios, the combination of running them in open architecture, the blending of alpha and beta into one portfolio and the strong track record. So we're really optimistic about the go-forward prospects for the models.

Let me just -- one addition, Craig. So the last piece of models would be third-party models and really and particularly around the retail space, the adoption of what people call smart beta has really been minimal to date. But we are hearing and expecting that, that will change maybe in the second half or significantly in 2019. So we do think that the totality of all models, ours and third parties, will continue to show substantial growth for WisdomTree.

Our next question comes from the line of Bill Katz of Citigroup.

This is Brian Wu filling in for Bill. I'm wondering if you could provide some color on your expectations for growth, fee rates and margins, related to the Cetera partnership.

So Brian, we don't disclose the fees that we pay in light of these partnerships. The expense that we do have go through our third-party sharing line and we've given guidance around that, and we expect it to be about 3% of our revenues.

Our next question comes from the line of Chris Shutler of William Blair.

I also want to ask about the Cetera agreement. So can you just help us understand, just where on their platform those ETFs are going to sit. So I'm guessing you envision advisors mainly reviews ETFs in the fee-based parts of their book. I just want to confirm if that's correct. And then any sense of, how many ETFs would be available and is the agreement exclusive?

Sure. Let me take them one by one. So first of, in terms of where our ETFs are available for execution. So we have joined their no-transaction fee program as the first, and currently only, ETF sponsor on that platform. That encompasses all of Cetera's various broker-dealers. They have 6 of those in total with nationwide coverage. So the 7,900 advisors mapped to one of those 6 broker-dealers and regardless of which one that you are part of, you are able to access our strategies. Historically, ETFs have played particularly well in discretionary and fee-based, our managed money portions of the portfolio, and Cetera has the large managed money component on their platform overall. So they are available for execution in both transaction-based accounts and fee-based accounts. Regarding your question on exclusivity, the way that we think of it is, we're the first and only kind of, currently, in the platform today.

And will it be all of the ETFs, Kurt?

Oh yes, sorry about that, I missed that part of it. Yes, all of our ETFs are available, which is actually very unique, if you look at ETF kind of commission-free or no-transaction fee relationships and if you look across the various platform, so most of them have a subset of products from a particular sponsor. But yes, all of our ETFs will be available on the Cetera platform, which is also very unique.

All right, great. And then on the advisor agreement, or AdvisorEngine agreement with this 3,000-advisor IBD. Should we think of you as replacing any legacy technology providers? Or is AdvisorEngine kind of sitting on top of whatever the advisors are using?

I'd say, it's a combination of both. For some advisors that are already using an existing kind of technology or fee-based platform, this would and could act as the replacement for it. But we also expect, given the comments Jono made on just strength of model portfolios and Asset Allocation strategies in general, that a relationship like this that allows an advisor to fully digitize their business and benefit from open architecture models will drive a lot of new growth to the platform as well. So I think we see it as an opportunity in both, to replace existing managers and platforms and also to generate new interest.

What I think Chris is asking about would AdvisorEngine be replacing other technologies? And at the start, it'll be side-by-side, but over time, according to their management's -- we would expect them to encourage a switchover to AdvisorEngine.

Our next question comes from the line of Brian Bedell of Deutsche Bank.

Can you just come back to the whole concept and strategy of -- really what I am getting at is open architecture versus exclusivity. And so very encouraging that you're announcing a lot of new agreements, going on for a little while here. But maybe, as you think about how you're tackling these new -- how you are getting into these new partnership, both from a technology angle, so think about it from in AdvisorEngines and going in also from your product. What is your view of how important open architecture is going to be from availability of ETF agreements? And then also as your AdvisorEngine competes against, say, other established platforms like the Aladdin for Walth or Jemstep or even internal -- other internal model portfolio construction. How do you see the technology competing on an open architecture versus sort of an exclusivity basis?

Hey, Brian, it's Kurt MacAlpine here. So first off, when you're thinking about open architecture as it relates to model portfolios, so we believe -- our intent with our model portfolios is to act in many capacities as the investment engine for a particular RA or a client or a firm of that nature. When you think about how people build portfolios themselves, very rarely do they build their own portfolios only using the products of one underlying asset manager. But when you look at how most asset managers build their model portfolios, they build them only using their own products. So for us, it was very important when we launched this initiative to build portfolios that reflect how investors actually want their portfolios built. And in our opinion, that's kind of best-of-breed, regardless of manager. So for us, it is very unique in the industry to be building them open architecture, but we actually feel it aligns much better with how Advisors platforms and then investors prefer to construct their portfolio. So I think that decision aligns better with how they operate and has allowed us to get off to a strong start both in terms of asset gathering, but also our assets on particular platforms. As you think about open architecture related to our technology investment, so particularly AdvisorEngine, part of the appeal and we made the initial investment in AdvisorEngine at the end of 2016 was the flexibility of the platform. We found that a lot of the other platforms in the industry were too rigid. So by that, I mean either they weren't -- they required an advisor to fundamentally change how they were doing business. So for example, they would have to change their trading tools, they might have to change their CRM, they might have to change their goals-based planning in order to use or adopt that technology. So AdvisorEngine, which aligns very well with how we think about the world preferred to build an open architecture platform with completely modular components. So if a particular platform or an advisor or a firm onboards AdvisorEngine, it's up to them to choose which components of the platform that they want and it's been built in a way that has seamless integration across proprietary capabilities and third-party capabilities as well. And I think this is quite unique as well on their side and I think it's playing really well which is helping to drive the strong adoption because it's allowing asset managers or wealth managers, in this case, to continue to operate the business that they want, while realizing that digital experience for their clients.

Okay, that's helpful. Maybe just, I don't know, if you have a -- it's probably too early to ask this, but a range of market share within your agreements in terms of what portion of that open architecture, you think, WisdomTree can grab. And then, just one other follow-up, you mentioned data intelligence, the initiative there, what portion of your AUM base are you able to sort of analyze it at this stage?

Great. So first so first off on the open architecture model portfolios. I mean, we've really build an open architecture lens in mind. So it starts with the end client's objectives. What are they looking to achieve, and then we will build the portfolio accordingly. So some of those portfolios have a very high share of WisdomTree, others have more a more modest share of WisdomTree. But it's really based upon the objectives that the client's looking to achieve and the risk tolerance and things like that, that go into that decision-making. So we really do truly build them open architecture for them. Regarding the data intelligence efforts, we talked a lot about this on previous calls around the efforts we've made around putting -- building or establishing one integrated database. So right now we are able to -- from an individual client perspective, we really have a holistic view. So what does that mean? It means, we have all of our sales interactions, captured via our salesforce capability. In that database, we have all of our kind of marketing, tracking and intelligence efforts tracked in there as well. All of the public filings around assets inflows that are available in the industry, plus the data agreements we have with a number of strategic relationships as well. So all of that is put into one integrated database, where we are able to see, at the client level, not only the activities and the engagement, but also the assets and the flows from them. We also, last year, and rolled it out late last year, collaborated with IBM Watson. So we're the first and only asset manager, using Watson's capabilities in the distribution process. What that's allowed us to do, in addition to having a machine-learning model, that helps determine who best -- who we should be targeting, what we should be targeting them with, and then specifically how we should be targeting. It also came with a lot of demographic data and information on those particular advisors and clients that's very helpful to our segmentation and prioritization efforts. So I would say, the way to think about the data intelligence effort is, we are now in the execution phase. Obviously, we're continuing to add-on and strengthen the capabilities, but it's been up and running in our distribution organization for the last few months.

And the level of observations that when you take client, that's at the intermediary level, not at the actual holder -- not the actual personal individual holding that's ETF? Is that correct?

Correct, yes. At the financial advisor level.

Our next question comes from the line of Michael Cyprys from Morgan Stanley.

I just want to circle back on Japan, seems little bit of a change in approach, just wondering if you could share just a little bit more color around closing the office and the new marketing agreement. And maybe just your perspective on what's changed, relative to your expectations when you first went into Japan?

Sure, so it's Kurt MacAlpine here again. As you think about the Japan strategy, this is a different approach for us to Japan. So the way we think about it is, it allows us to keep the kind of the underground presence and the optionality in the Japan market, while doing it in a more cost-effective manner for WisdomTree and its shareholders. So the relationship that we are pursuing, so before, as you probably know, we had a physical presence in Japan with our own dedicated team. We are now, as Amit had mentioned earlier, incorporating Japan distribution into our relationship with Premia Partners, who's been our distributor in Asia ex-Japan into earlier this year. So for us, it allows us to maintain optionality on the market, continue to engage with the clients that our teams laid a nice foundation for, but to do in a much more cost-effective manner for us. If you think about what's changed, I don't think anything has changed in particular on the Japan market. I would say that the rate and pace of regulatory reform was probably slower than everyone would've liked. We remain confident that it's going to happen, and we want to make sure that we're set up for success when it does happen. So I think the combination of the intellectual property that we offer plus the ongoing and continued presence via Premia Partners, will position us well to achieve this, once that change happens.

Okay, great. And just moving to the U.S, we saw SEC proposal on a rule on ETF to streamline the issuance process there. Just curious, what sort of changes, if anything, you need to make to your distinct line of ETFs? And how you're thinking about the competitive dynamics and strategic implications of that rules, is it lower barriers to entry? How are you thinking about that?

So the rules really were a net positive for WisdomTree. There was some equalization that others got with respect to some creation and redemption basket flexibility that we have. But we also picked up significant greater flexibility around index-based product where the vast majority of our revenue and assets lie that -- so benefits that iShares that some of the earliest competitors had, that first in self-indexing was hampered with, meaning us so net-net, I think it's a straight positive.

Our next question comes from the line of Bren Hawken of UBS.

Just wanted to clarify on the comment on third-party distribution costs. I think previously, you had indicated the U.S. -- those U.S. cost would be 2.6% to 3% of investment advisory fees, is that now just 3%? And as you guys were able to generate more success in landing these deals, should we assume there is upside to that guidance, if those assets continue to grow proportionally?

Hey, Bren, it's Amit. Yes, so right now you can see it's running at about 3%. We had given guidance about 2.6% to 3%. The reason it's running a little bit on the higher end of that range is not because the expense is higher, you can see actually sequentially, the expense is down. In fact, the revenues have come down because of the outflows that we've seen in HEDJ and DXJ, and the fact those 2 funds don't really make up the large percentage of some of these platform deals that we have. So I think using a 3% number for your models going forward is probably a good number to use. If we do see some of those trends changing, we will give updated guidance on that.

Okay. And then early days, but what are your initial thoughts on the -- it's sort of de facto HEDJ from the ETF Securities commodities products? And it looks like, both of the suites, the currency hedge and the commodities are now a full quarter to-date. So what do you think might be happening in July that has caused that hedge to be less effective? Understood that it's a short window, right? I mean, we're not even dealing with a month, but it would be helpful to hear your thoughts on that.

This is Jeremy Schwartz, Director Research. And so from a pure asset class level, one of the things that hampered gold demand, you'd say, so you have rising interest rates, and rising interest rates is one of the negative offsets for gold. So in the second quarter, you saw a very strong dollar, 5% higher in the dollar and that was -- sorry negative for commodities, negative for gold. So you saw some [indiscernible] there. You hadn't seen the strong dollar trends that yet to renewed interest in currency hedging, just given the global trade uncertainties. And so we do think you're right that there is natural weak dollar HEDJ from gold itself, towards the given currency [indiscernible] family, but this unique nature of the market environment so far haven't seen that really come into fruition yet.

Our next question comes from the line of Alex Blostein from Goldman Sachs.

This is actually Ryan on behalf of Alex. So I have a follow-up to the prior question. As you think about timing of potential synergies of having the combined platform to ETF Securities, when are you kind of thinking that there might be some uplift in that distribution and growth sales there?

Sure, it's Kurt here. So from a distribution and marketing standpoint, if you think about the acquisition just having closed this quarter. We've been focused on integrating the team, getting the team members cross-trained on the new products that each of them are assuming, given we have folks from legacy WisdomTree and legacy ETF Securities, making new client introductions and getting our UCITS approved on platforms, where ETF Securities has had access historically, where WisdomTree didn't have it. In addition to that, we're in the process of streamlining the brands into one brand, which will be using WisdomTree across all the range of products, that's expected to happen this fall. So I would say, look, it is very early days. I'm very optimistic given how well the team has done since the integration has happened, the adoption that we've seen on the platforms that've set our UCITS products up for strong success going forward. So I don't think it'll be -- we're certainly in the early days, but I am optimistic that we'll start to see an uplift in the near future.

Got it, okay. And then maybe just another quick question on Cetera, might be a little bit of a challenging one to answer. But as we think about ETF usage on that platform in general, do you have any sense, maybe more qualitative around how much ETFs are currently used?

Sure. So in terms of the specific breakdowns to the platform, I can't share Cetera's ETF usage versus other structures. Part of what excites me about the opportunity for us to collaborate with Cetera, and then the IBD community, in general, is if you look at ETF adoption by IBDs, or independent broker-dealers, it's actually been lower than what we've seen at other channels, the RAs, the wire house channel and some institutional segments as well. So I'm excited because this platforms allows us to participate in the no-transaction fees platform, be a partner of Cetera overall, which'll gives us great form to go out and engage with and interact with the advisors that affiliate with all our different broker-dealers. So I think this should be a great catalyst for us to certainly increase awareness of WisdomTree, have us -- give us a platform for us to tell the story about our strategies and I think we're very well set-up for success. Often if you look at the types of strategies that resonate with IBDs and this isn't a Cetera-specific comment, but just about independent broker-dealers in general, a lot of them are seeking alpha-generating strategies. And if you think about our modern alpha approach to investing, I mean, this is what we do. So while the structure maybe newer to independent broker-dealers in general, the philosophy around alpha generation, or in our case, modern alpha, is something that resonates very well. So I think this relationship sets us up well to -- for success.

Our next question from the line of Keith Housum of Northcoast Research.

The first question regarding the average advisory fee drops, year-over-year from 50 basis points to 48. Is that more reflective of the mix of the ETFs? Or is that attributable to the ETF acquisition, or just some commentary on the difference in the base fee?

Well, there were certainly some -- a slight overall decrease in fee capture with ETFS that they were at a slightly lower fee capture than the broad traditional WisdomTree platform. In terms of -- and then most -- the rest of it has to just do with the mix. So as an example, the quarter in terms of the flows for us, in the U.S., were led by domestic fixed income and so it tends to be at a lower fee rate, but it's really the asset mix that is driving that.

Okay, great. And then just coming back to the AdvisorEngine question that were previous -- in previous call, you guys have given us some metrics in terms of the client additions AdvisorEngine is coming through. Is there any metrics you guys can give us an idea about how AdvisorEngine has been growing over the past year?

I mean, certainly, so the number of client update was kind of tied to how AdvisorEngine had disclosed their clients, which they did on a stand-alone basis, prior to the Junxure acquisition, which has been integrated since then. I can tell you, just kind of speaking about the overall trend, the adoption of the platform continues to remain strong. AdvisorEngine had rolled out kind of a new version 2.0 of their platform earlier this quarter, which has sparked strong adoption in firms that had previously signed up for the platform that were waiting for version 2.0 to come out are now transitioning onto that platform. So in the last quarter -- but the number of firms are using the platform has increased and the assets on that platform has increased. The pipeline, as it has for the last while continues to remain strong and continues to grow and as we continue to demonstrate through more clients on the platform, but notable wins, like the one we're going to be disclosing in a few weeks, just continue to reinforce the strength and the power of the platform and set us up well to grow going forward.

Okay, I appreciate that. And then Amit, just a little bit of housekeeping item here. Other income was up significantly compared to prior period and I understand from, you guys released, that was creation redemptions from ETF Securities acquisition. Would we expect that to continue? Or is that just a onetime blip in other income this quarter?

No, that's a continuous. So it's just a different revenue stream that ETF Securities business had when they break out their creation redemption fee, they have a separate fee for that. So that should be an ongoing item.

Our next question comes from the line of Mac Sykes of Gabelli.

I just have 2 questions. I'll just say them first. First, do you think the proposals that Mike had just talked about, affect your operating cost at all, going forward, in terms of those SEC adoptions? And then I've asked this in the past, but maybe you could just give us an update on where you see the industry in terms of potential innovation share over the overall market. So what I'm trying to understand is in terms of your growth going forward, how much of that do you see as new products that you innovated on versus just taking additional share of adoption of the overall market?

So with respect to implementing whatever the -- as that proposal from the SEC stands today, we'll have really almost a no cost effect -- there's no cost effect of that of the new proposed SEC rule on us, Mac. And in terms of future product, we do believe that the -- well, we believe that significant flow will come from future product, particularly post some sort of correction, which will really play into or push into active strategies, transparent active strategies, things like the multifactor, which we discussed earlier, the liquid alts strategies, the new rising rate fixed income, we're very, very optimistic about future flow from new products or relatively new products, but we're incredibly well -- incredibly encouraged by -- for the last 3 or 4 quarters, how well historical product has flowed, whether it's things like DEM or DGS, sort of a historical flow leaders are also continuing to flow. So it seems a balanced, but we're very excited about the new product.

Our next question comes from the line of Bill Katz of Citigroup.

This is Brian again. Just a quick modeling question. For the U.S. comp ratio guide, is this gross or net of anticipated savings?

So the guidance that we've given -- so we gave guidance about 27% to 29%. We're running right now at about 28%. I expect us to be in that middle of that range for the rest of 2018 and then obviously for '19 because we do have the operating leverage in the comp line as the revenues increase. I would expect that range to drop in future periods, but we'll give updated guidance on that when we do our Q4 call.

Great. And then one more, for noncomp expenses in second half '18, could you provide some color or the outlook for that?

So generally speaking, if you look at our historical trends, you can see that we generally have a slowdown in certain of our spending in Q3. But I don't see any major changes from what you see from the first half to the second half, absent some of the cost initiatives that we disclosed in today's call.

And our next question comes from the line of Michael Carrier, Bank of America Merrill Lynch.

This is actually Jeff, stepping in for Mike. Regarding the $7 million of annual cost saves you guys now see, do you expect to realize all of that? Or is it possible that you may deploy some of that into new growth opportunities that may have previously been on the back burner?

No, I think we expect all of that to flow to our bottom line and this just a matter of -- we have efficiencies, fact that we're gaining leverage and able to allocate some resources in other ways. We expect all of those saving to flow right to the bottom line.

Our next question -- that is all the questions we have, I'd like to hand the call back over to Jono, WisdomTree CEO, for closing remarks.

I just want to thank you all for your participation today. We look forward to speaking to you next quarter. Thank you. Have a good day.

Ladies and gentlemen, thank you for participating in today's conference. This does concludes today's program, you may all disconnect. Everyone, have a great day.